Automakers Won $25 Billion Low-Interest Loans

28 September, 2008 06:21:00

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The U.S. Congress gave final approval of $25 billion low-interest loans designed to help companies retool for more fuel-efficient vehicles that American consumers are demanding.

The loans are one of several government aids -- from research funds to consumer tax credits -- that automakers will increasingly rely on to build the technology they need to survive.

After President Bush signs the bill, the Department of Energy will write rules to manage the loan program. Then companies need to apply. Loan-interest loans could be available by mid-2009 even though some administration officials have said legal and administrative procedures could delay them until 2010.

Under the loan program, automakers and suppliers could borrow at interest rates close to what the U.S. Treasury does -- roughly 5% -- rather than the 15% they would have to pay on financial markets.

The loans should help Detroit 3 to retool factories to build more efficient models, such as the Chevrolet Volt or Chrysler's electric-vehicle concepts and to meet rising federal fuel efficiency standards.

The companies say they need the help because they are already struggling with disastrous sales of their core sport utilities and pickups and a credit outlook that seems to worsen with the metastasizing Wall Street crisis.

Critics view the proposed auto industry loan package as another federal bailout of corporations that got themselves into trouble and that now are trying to escape the consequences of their mismanagement at taxpayers' expense.

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